Computer-equipment supplier Cisco Systems Inc. has announced that individuals age 70 or older will no longer be eligible for nomination or renomination to the company’s board of directors. “This provides both the board and our shareholders with a clear roadmap for the natural evolution of our board of directors,” said chairman John P. Morgridge, in a statement.
Based on the new policy, vice chairman Donald T. Valentine and board member James F. Gibbons will not be eligible for renomination at this year’s annual meeting, in November. Valentine and Gibbons intend to remain on the board until that meeting, when Cisco expects to reduce the number of directors from 13 to 11.
In the case of the Morgridge, who is currently 71, the policy will take effect with the November 2006 meeting.
“Creating a more formal timeline for board member changes,” added Morgridge, is “consistent with similar policies adopted by leading corporations.” Indeed, of the 5,500 U.S. public companies tracked by Institutional Shareholder Services (ISS), more than 18 percent now have a mandatory retirement age for directors, compared with 11 percent in July 2003.
For larger corporations, the percentage is much higher. About 79 percent of companies in the Standard & Poor’s 500 have established a mandatory retirement age for directors, according to ISS, which cited a November report by executive search firm Spencer Stuart. In 1992 that figure stood at 84 percent, according to the search firm; it fell as low as 66 percent in 2003 before rebounding to its current level.
Among the firms with a mandatory retirement age, 88 percent set it at age 70 or 72, according to ISS, which again cited Spencer Stuart. The shareholder advisory group noted that some boards have the discretion to extend the service of a director who has reached retirement age.